The triumph of the social animal

(Reuters) - Does fairness matter? As France prepares to elect a president this spring and the United States gets ready to elect a president in the autumn, that old philosopher's chestnut is gaining tremendous real-time political relevance.

Economics, by contrast, hasn't traditionally been much concerned with fairness. Instead, economists have based their analysis on "Homo economicus," a model human being who is perfectly rational and perfectly guided by self-interest.

The financial crisis of 2008 made it hard to believe in a world of perfectly rational actors, even when they earn million-dollar salaries and have advanced degrees. Now, a growing body of research is challenging the second part of the definition of Homo economicus — that he is guided purely by self-interest.

The alternate view was advanced by Armin Falk, a Bonn University economist, at a recent economics conference in Berlin organized by the Institute for New Economic Thinking. It emphasizes the importance of fairness and trust to human behavior. This approach takes as its starting point the idea that we are social animals, driven powerfully by how we fit into our community.

The social animal school may sound touchy-feely, but one of its favorite research tools is the M.R.I. That is the machine Dr. Falk and his colleagues used to try to figure out whether we care most about the absolute material reward we get for our work — as a rational Homo economicus should — or whether fairness matters, too.

In one experiment, subjects were paid 50 percent more, the same amount or 50 percent less than a peer for doing the same amount of work. Crucially, the absolute payment the research subject received in each case was identical.

But brain scans showed that fairness had a strong impact at a neurological level. Anyone who has ever held a job or has a sibling won't be surprised to learn that the most powerful response was evoked when the research subject was underpaid, compared with his identically tasked peer. Interestingly, when researchers simulated low social status in their testers, unfair treatment mattered less. The meek may inherit the earth, but in the meantime they have been conditioned to accept less than their fair share.

In another experiment, Dr. Falk and Ernst Fehr, of the University of Zurich, investigated an issue that should be of great interest to the world's human resources departments: Does our perception of fairness influence how hard we work? Their answer is yes — workers who are underpaid don't work as hard.
Continued...